Commercial Mortgage Lending Takes 32% Jump

Commercial mortgage lending rose 32% in the third quarter, spurred by falling interest rates, the Mortgage Bankers Assn. of America reported.

Lending on commercial properties such as apartment buildings and office complexes was $18.7 billion in the three months ended Sept. 30, compared with $14.1 billion in same period of 2000 and $17.7 billion in the second quarter, the trade group’s survey of U.S. lenders found.

Commercial mortgage rates averaged 7.22% in the second quarter, the latest period for which data are available, down almost 1.5 percentage points from its peak in 2000, according to the American Council of Life Insurers. With rates down, some property owners are choosing to refinance rather than sell at what they perceive to be low offers, especially after the terrorist attacks, analysts say.

“Indications are that volumes for the fourth quarter were approaching or exceeding pre-Sept. 11 levels,” the Mortgage Bankers group said. “Lower interest rates are a key driver of the continued demand for real estate financing.”

One-third of the companies polled said lending declined by 10% to 50% in September after the attacks.

About 73% of investment banks, 71% of pension funds, 69% of commercial banks and 65% of life insurers said they are tightening their underwriting criteria with the economy slowing.

Life insurers made 25.6% of the loans in the survey, while investment banks made 25.1%.

Fannie Mae and Freddie Mac, the two largest buyers of residential mortgage loans, financed 24% of the commercial mortgage loans, the survey found.

The two government-sponsored mortgage companies, which finance loans only on apartment buildings, made 53.7% of those loans in the quarter, down from 60.7% in the second quarter.